Trend Trading with Options

Options trading strategy by trend

One way to think about the concept of trend following is put forward by Michael Rulle. Michael is President of Graham Capital.

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Ken Tropin founded Graham Capital. Where was he before that? Tropin is the former President of John W.

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Small world! Rulle offers: Trend following achieves positive returns because long-term months trends occur in virtually all markets some of the time.

Trend followers create quantitative models to capture these long-term trends while limiting the cost. The strategy will generally capture almost every ex-post long-term trend that appears in any market.

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The cost of such capturing occurs when trends initially appear but end up reversing and the trend follower loses money. Hsieh, demonstrate that trend following returns are highly correlated with being long call options and put options i. Breaking this down, what does it mean for the average trader?

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The stop loss in trend following is very much like the option premium you pay to buy a call or a put. You have limited downside and unlimited upside.

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There are no stops. There are no exits. Hsieh confuse the big picture point. More from Graham Capital:.

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